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Running a business takes time, effort, and money. One way to protect your profits is by using smart tax plans. Many small business owners pay more taxes than they need to. By using the right methods, you can lower your tax bill and use that money to grow your business.
Here are eight tax strategies for businesses that can help you save money in 2025.
1. Use the Pass-Through Entity (PTE) Tax Election
If your business is an S corporation or a limited liability company, you can choose the Pass-Through Entity tax option. This allows your business to pay state income taxes at the company level. When you do this, the amount of income taxed at the federal level goes down.
For example, if your business earns one million dollars and pays sixty thousand dollars in PTE taxes, your income for federal tax becomes nine hundred forty thousand dollars. You pay less federal tax because the income amount is lower. Many states now offer this benefit. Speak to your tax advisor to find out if your state allows this option.
This is one of the most useful tax strategies for businesses that want to reduce their federal tax.
2. Start a Retirement Plan for You and Your Workers
A retirement plan helps you save money for the future and makes your business more appealing to workers. There are several plans you can use. These include a SIMPLE IRA, SEP IRA, 401(k), and profit-sharing plans.
When you put money into these plans, you may receive a tax deduction. The money you add for yourself and for your workers can lower your taxable income. If you are starting a new plan, you might also get a tax credit to help with setup costs.
You must check the rules for each type of plan. Some plans must be set up before the end of the year. Others allow you to contribute up to the tax return deadline. This makes retirement plans one of the best tax strategies for businesses that want to plan ahead and save.
3. Buy Equipment and Use Section 179 Deductions
If you buy tools, machines, or other equipment, you can claim a deduction under Section 179. This means you can deduct the full price of the equipment in the same year you start using it.
In 2024, you can deduct up to one million two hundred twenty thousand dollars. If you spend more than three million fifty thousand dollars, the deduction starts to shrink. If you had a slow year and expect better results next year, wait and make the purchase in the new year. That way, you get the benefit when your taxes are higher.
Using Section 179 is one of the most direct tax strategies for businesses that invest in equipment.
4. Add Bonus Depreciation
If your equipment costs go above the Section 179 limit, bonus depreciation can help. In 2024, it lets you deduct sixty percent of the cost of new or used property. You must start using the property before the end of the year.
Bonus depreciation is different from Section 179. There is no limit on how much you can spend, and you can apply it to both new and used items. This is useful for growing businesses with big equipment needs.
This makes bonus depreciation one of the most flexible tax strategies for businesses that are still building.
5. Get Tax Credits for Green Energy Investments
If your business installs clean energy equipment, you may qualify for federal tax credits. These credits are for things like solar panels, energy-saving upgrades, and electric or hybrid vehicles.
The federal government passed a law in 2022 to support green energy. There is money available for companies that choose clean energy options. These upgrades can also lower your energy bills over time.
Check with your tax advisor to see which credits you can use. You can also ask if your state has extra incentives. Green improvements are smart tax strategies for businesses that care about savings and the environment.
6. Claim the Credit for Starting a Retirement Plan
If your business starts a new retirement plan, you may get a credit of up to five thousand dollars per year for the first three years. To qualify, your business must have fewer than one hundred workers.
There is another credit of up to one thousand dollars per worker. This helps cover the money you add to your workers’ retirement plans. These credits are helpful because they lower your tax bill and support your team.
Starting a plan can be one of the most rewarding tax strategies for businesses that want to give back to their employees.
7. Plan the Timing of Your Expenses
You can save on taxes by choosing the right time to spend money. If you think your income will be higher next year, it may be better to wait and make large purchases in the new year. If you had a good year and want to lower your taxes now, you can buy equipment or give bonuses before the end of the year.
This type of planning gives you control over how much tax you pay in each year. It helps you smooth out your profits and losses in a smart way.
Expense timing is one of the easiest tax strategies for businesses to start using right away.
8. Use Credits for Hiring and Training Workers
You may qualify for tax credits if you hire certain types of workers or offer training programs. Some credits include:
- A credit for hiring veterans or people who have faced hardship
- A credit for offering paid family or medical leave
- A credit for helping with child care for employees
- A credit for running training or skill programs
These credits reduce your taxes and support the growth of your team. They are some of the most helpful tax strategies for businesses that want to invest in people.
Final Thoughts
Saving on taxes is not just about filling out the right forms. It takes planning and smart choices. The eight tax strategies for businesses in this guide can help you reduce your tax costs and make your money work harder for you.
You do not need to use every strategy at once. Choose the ones that fit your business, and speak with a tax advisor to make sure you follow the rules. When you plan ahead, you can keep more of what you earn and build a stronger business.